• Gujarat: Low gas prices fire up power plants

    Plummeting gas prices due to the glut caused by the Covid-19 pandemic have fired up gas-based power plants in the country, many of which have been idle due to viability issues. For the April to July period, these plants have shown an increase of 3,331 million units generated, or about 19.4%, compared to the corresponding period last year. With the low prices, Gujarat seems to have emerged as one of the biggest beneficiaries.

    In the April to July period this year, 20,477.31 million units (MU) of power were generated from gas-fired plants across the country compared to 18,146.72 MU in the same period in 2019, Central Electricity Authority (CEA) data shows. In Gujarat, the state-run gas power units, many of which had shut operations, have been revived over the past few months. In the April to July period, the state-run projects produced 3,939 MU of power compared to 447 MU in the corresponding period last year.

    “Gujarat has been the biggest beneficiary as a large number of state-owned gas-fired projects have been revived recently. There has been an overall glut in the international gas markets due to lockdown in many countries. We have taken advantage of situation and booked spot LNG cargoes in advance,” said Saurabh Patel, Gujarat energy minister.

    As a result, many state-run plants, lying idle for a few years, are now running at about 50% capacity, according to Patel. The state booked 11 spot cargoes from April to October at low prices ranging $2.25 per million British thermal unit (MBTU) to $3.5 per MBTU.

    “Gas-fired energy has become cheaper compared to coal. The cost of generation had come down to Rs 2.7 per kilowatt hour (unit) for gas-based units compared to thermal where the cost is more than Rs 3 per unit,” said Patel.

    For privately run projects in Gujarat, the generation is up marginally at 3,733 MU in April-July period compared to 3,350 MU last year.

    India has a gas-based power generation capacity of 25,000MW of which about 7,700MW is based in Gujarat. The state power units contribute one-fourth of Gujarat’ capacity.

    Gas prices that were around $5-6 per MMBTU last year dipped to an all-time low of $2 dollars in the April to July period this year. In last fortnight, prices have again shot up to about $4 per MMBTU.

    “Although gas generation using oil-linked LNG contracts would still cost Rs 5.5/kwh, gas pooling may reduce the cost of gas for power plants, thus increasing PLFs and gas consumption,” according to an August 27 report by Motilal Oswal.

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